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Review of Keynesian Economics
Article . 2017 . Peer-reviewed
Data sources: Crossref
https://dx.doi.org/10.7275/282...
Other literature type . 2016
Data sources: Datacite
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Profit-led growth and the stock market

Authors: Michl, Thomas R.;

Profit-led growth and the stock market

Abstract

This paper presents a simple stock-flow consistent model of corporate capitalism with a financial market for firm equities issued by managers as part of their investment plan with the investment rate in turn sensitive to the q ratio, workers who save for life-cycle motives, and capitalist rentier households who save from a bequest motive. The model assumes full capacity utilization; saving and investment decisions are coordinated through changes in the valuation of the capital stock or q ratio. Changes in valuation can induce enough investment and capitalist consumption to fill the demand gap left by a reduction in the wage share. But unless there is a strong sensitivity of investment to the q ratio, the increased profitability will be dissipated in a profit-led stock market boom. The model helps resolve the neoliberal paradox of rising profitability with little growth. It also clarifies the relationship between classical and Keynesian growth models which can be seen as special cases arising from limiting values of the investment sensitivity to the q ratio.

Country
United States
Related Organizations
Keywords

Cambridge equation, Economics, q-ratio, heterodox growth model, 332, Pasinetti Paradox, stock-flow consistency

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
12
Top 10%
Average
Top 10%
Green